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A Project of The Annenberg Public Policy Center

Dueling Distortions in North Carolina

It didn’t take long for the governor’s race in North Carolina to turn ugly. Although it’s only June, Republican Pat McCrory and Democrat Walter Dalton both find themselves under attack from outside groups spending heavily on misleading TV ads:

  • A Democratic group claims McCrory, a former mayor of Charlotte, “used his position as mayor to lobby state government for millions in tax breaks” for a company that paid him “over $140,000 to sit on its board.” That’s a distortion. McCrory asked the state to help prevent Lending Tree from leaving the city for South Carolina. McCrory was not on the company’s board at the time. He did not join until three years later.
  • In another ad, the same group accuses McCrory of “questionable ethics” for traveling “to Washington to testify as mayor about a regulation worth $600 million” to his employer, Duke Energy. True, but McCrory testified against proposed clean-air regulations as chairman of the Energy and Environment Committee of the U.S. Conference of Mayors, which overwhelmingly opposed the proposed rules for fear they would drive industry out of urban areas.
  • Meanwhile, the Republican Governors Association claims that a sales tax hike supported by Dalton “will kill 8,000 jobs.” But the ad misrepresents the findings of an economic study, according to its author. The RGA extrapolated the jobs data from an economic report that studied the impact of reducing the sales tax.
  • The RGA also claims Dalton has “consistently voted to raise taxes.” While it is true he has voted to raise some taxes, Dalton has also voted to cut taxes, too, including eliminating both the inheritance tax and sales taxes on food.
  • The RGA says North Carolina “has the worst business tax in the South” under Dalton and Gov. Beverly Perdue, citing an annual report by a conservative think tank. But North Carolina had the “worst business tax in the South” before Dalton and Perdue took office in January 2009, so that’s nothing new.

Case No. 1: Lobbying for Tax Breaks?

North Carolina Gov. Beverly Perdue, a Democrat, defeated McCrory in 2008 to become the state’s first female governor. But Perdue announced in January that she would not run for reelection. Like Nature, political parties abhor a vacuum and rushed to fill the void. So far, about $2.4 million has been spent on the governor’s race, according to the Campaign Media Analysis Group, a unit of Kantar Media.

North Carolina Citizens for Progress, a nonprofit formed last year and largely funded by the DGA, is one of the most active outside groups in the campaign. It has aired two TV ads attacking “Pat McCrory’s questionable ethics.” In both cases, the TV ads deal with outside positions McCrory held while serving as mayor of Charlotte. The mayor’s job is a part-time position. It currently pays $22,000, and paid even less when McCrory served from 1996 to 2009.

Citizens for Progress first attacked McCrory in a TV ad titled “Today’s Tree,” which criticizes him for serving as mayor and sitting on the board of tree.com, the parent company of Lending Tree. But the ad, which ran from mid-May to late May, distorts the facts.

The ad notes correctly that tree.com “paid Pat McCrory over $140,000 to sit on its board while he was mayor of Charlotte.” Tree.com reported that it paid McCrory $78,333 in cash and $62,500 in stock awards for a total of 140,833 in 2009, his last year as mayor.

But then the ad goes on to say, “He used his position as mayor to lobby state government for millions in tax breaks for the company.” At this point, the TV ad shows an image of a letter McCrory wrote to the state Department of Commerce, with the words “mayor’s official government stationary” superimposed on the letter, as if it were something sinister.

There may have been a conflict of interest if McCrory sat on the board at the time, but he did not. The letter was written Jan. 4, 2006. McCrory didn’t join tree.com’s board until January 2009 — three years after the letter was written. The ad ignores that fact.

As important, McCrory’s letter was nothing more than a routine request to help keep two businesses — Lending Tree and Brooks Pharmacy/Eckerd — from leaving the city for South Carolina. In Lending Tree’s case, the mayor wrote that the company was offered “an estimated $53 million in state and local incentives from South Carolina.” McCrory wrote that North Carolina had offered about half that and he asked the state “consider any and all means available to you to increase the amount of the State’s incentive.”

What mayor hasn’t written a similar letter when a major local employer threatens to leave town?

Case No. 2: Duke Energy

In an ad that began airing June 1, Citizens for Progress says, “While he was mayor of Charlotte, Pat McCrory also had a full time job at Duke Energy, but McCrory refused to disclose his hours, salary or responsibilities. McCrory even went to Washington to testify as mayor about a regulation worth $600 million to the company and then flew home on their corporate jet.” The ad, once again, distorts the facts.

McCrory started working at Duke Energy out of college in 1978 and, as mayor, worked as “a senior adviser in the economic development group,” as the Charlotte Observer described it in a 2007 article. McCrory listed Duke as his employer on the city’s required ethics forms. The form did not require him to disclose his hours or salary.

The most damaging allegation is the suggestion that McCrory misused his office by testifying in Washington “as mayor about a regulation worth $600 million to the company.” That’s a misleading account of what happened. In 1997, McCrory was chairman of the U.S. Conference of Mayors’ Energy and Environment Committee. On Oct. 1, 1997, he went to Washington to testify against a clean-air regulation proposed by the Environmental Protection Agency on behalf of the Conference of Mayors, not Duke Energy.

On June 12, 1996, the EPA gave notice of its intent to propose rules to control ozone levels and fine particular matter — a proposal that urban mayors in particular feared would drive up the cost of doing business in their cities and, ultimately, force businesses to leave for the suburbs. The EPA formally issued its proposal on July 17, 1997.

In his prepared remarks, which are available in the newspaper archival service Nexis,  McCrory told a subcommittee of the House Commerce Committee that he was speaking as chair of the Energy and Environment Committee of the mayors’ association and he expressed the mayors’ concern about the proposed rules. He said that “the nation’s mayors recorded their opposition to the proposed standards” at their meeting in San Francisco in June.

The opposition to the proposed rules at the time was led by then-Detroit Mayor Dennis Archer, a Democrat whom the Washington Post described as a “close ally” of President Clinton and Vice President Al Gore. Archer sponsored the resolution opposing the regulations at the mayors’ conference in San Francisco. Only one mayor voted against Archer’s resolution.

Los Angeles Times, June 25, 1997: “How would we attract new business to come to our cities and keep the businesses that are here without defensible standards? . . . Who’s going to pay for it?” asked Detroit Mayor Dennis W. Archer, pointing to the standards’ $60-billion price tag. “How can I get our unemployed jobs if I can’t attract business?”

That same month, then-Chicago Mayor Richard Daley, one of the most powerful Democratic mayors of his time, penned an op-ed for the New York Times, warning that businesses could move out of the cities rather than pay for expensive pollution-control systems at their urban facilities.

Daley, June 27, 1997: The new clean air regulations could have an equally devastating effect. For instance, if a city is having trouble meeting the new standards, a moratorium could be placed on industrial development. Industry moves out, promoting more traffic and suburban sprawl.

There is no question that McCrory’s employer had a stake in the clean-air proposal. But McCrory fairly represented the mayors’ position on the EPA rules — even if it did coincide with his employer’s business interests and even if he did fly back on his company’s plane.

Raising Taxes, ‘Killing Jobs’?

On the other side of the ballot, Lt. Gov. Walter Dalton finds his record on taxes under attack in a couple of TV ads from the Republican Governors Association. The RGA’s latest ad, which aired in late May and early June, was titled “Dalton’s High Tax Record.”

The ad claims “the Dalton-Perdue new 15 percent sales tax increase will kill 8,000 more North Carolina jobs.” The RGA made the same claim in an earlier ad attacking Dalton’s record on taxes. The claim is a reference to Gov. Beverly Perdue’s proposed budget, which would raise the state’s sales tax by 0.75 percentage points, from 4.75 percent to 5.5 percent. That’s actually a little lower than it was last year. The state’s sales tax was 5.75 percent, but a temporary 1 percent sales tax increase enacted in 2009 expired last July. Dalton supports the proposal.

The RGA cites a study by the UNC Center for Competitive Economies to support its claim that the tax increase will cost 8,000 jobs. But the April 2011 report did not evaluate Perdue’s sales tax proposal. It was a study that looked, among other things, at the impact of the expiring 1 percent sales tax.

The analysis estimated that 11,720 private sector jobs with an average salary of $34,200 per year would be created as a result of letting the temporary 1 percent sales tax expire. The RGA calculated that three-quarters of those jobs — or roughly 8,000 jobs — would be lost if 0.75 of the 1 percent sales tax is reinstated. However, one of the study’s authors, Brent Lane, told WRAL in Raleigh, N.C., that the ad misrepresents his study.

WRAL, May 15: “(The ad) would seem to imply we did a study about what would happen if you raise the sales tax. That would be inaccurate,” Lane said.

The ad also claims that Dalton, a former state senator, “has consistently voted to increase taxes,” flashing the years 2001, 2002, 2003 and 2005 on the screen. Dalton did vote for tax increases during his 16 years in the Senate, and the RGA singled out five in particular.

Among the votes cited by the RGA, Dalton voted for a budget in September 2001 that the Associated Press said contained “a $620 million tax package that includes a half-cent sales tax increase and a temporary, two-year tax hike on the wealthy.” He also voted for a budget in 2005 that kept those two temporary taxes in place for another two years, as well as increased the tobacco tax from a nickel per pack of cigarettes to 30 cents.

But Dalton, too, has voted for tax cuts. He voted in 1997 to reduce the state sales tax on food from 3 percent to 2 percent. Only one senator voted against that bill, which became law. A year later, Dalton voted for a budget that repealed the inheritance tax and eliminated the remaining state sales tax on food. The Associated Press says the budget passed the Senate 48-0.

Finally, the ad claims that “under Dalton and Perdue North Carolina has the worst business tax in the South,” citing the Tax Foundation’s latest annual business climate index. It’s true that North Carolina ranked the lowest of all the Southern states in 2012, but that was also true in 2009 — so the state’s ranking among Southern states has not changed. The 2009 report was released in October 2008 — before Dalton and Perdue took office.

— Eugene Kiely and Lucas Isakowitz